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Vertical analysis of income statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement: 20Y1 Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 2041 20Y2 Sales $1,500,000 Cost of goods sold (510,000) Gross profit $990,000 Selling expenses $(270,000) Administrative expenses (180,000) Total operating expenses $(450,000) Operating income $540,000 Other revenue 60,000 Income before income tax expense $600,000 Income tax expense (450,000) Net income $150,000 $1,250,000 (475,000) $775,000 $(200,000) (156,250) $(356,250) $418,750 50,000 $468,750 (375,000) $93,750 1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Round percentages to one decimal place. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 2012 and 20Y1 20Y2 20Y2 2011 2011 Amount Percent Amount Percent Sales % $ % Cost of goods sold % % Gross profit % $ % Selling expenses % $ % Administrative expenses % % Total operating expenses % % Operating income % $ % Other revenue % % % Income before income tax expense % % Income tax expense % $ % Net income % % 2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1). The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) 2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1). The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) as a percentage of sales. As a result, net income as a percentage of sales . The sales promotion campaign appears to have been . While selling expenses as a percent of sales increased slightly, the increased cost was more than made up for by increased

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